Bitcoin price analysis (16-22 August): time for a correction?
Bitcoin could face stiff resistance in the $50,000 to $51,599.95 zone
The total crypto market capitalisation rose above $2trn on 14 August, according to data from Coinmarketcap. The sharp recovery in cryptocurrencies has been led by Bitcoin but during the current rise, the spread between Bitcoin futures and its spot price remains muted, indicating a lack of aggressive leveraged trading.
FRNT Financial’s co-founder and CEO, Stephane Ouellette, told Bloomberg: “Typically we look at that as more of a strong-handed rally, which implies that the leverage portion of the rally comes later. If that is the case, those $100,000 targets are very reasonable, I’d suggest.”
Glassnode, the blockchain data and intelligence provider, in its newsletter, titled The Week On-chain, said that large transactions exceeding $1m in value have soared from 30% to 70% since September 2020. The transactions valued between $1m to $10m rose sharply in late July as bitcoin dropped close to $29,000.
On the other hand, the dominance of transactions of less than $1m in value has dropped from 70% to about 30% to 40% in the past year. This suggests “a new era of institutional and high-net-worth capital is flowing through the Bitcoin network since 2020,” the report said.
Will buying from institutional investors boost bitcoin higher? Or is it time for profit-booking? Read our Bitcoin price trend analysis to find out.
Bitcoin price technical analysis: weekly chart
Bitcoin’s price extended its recovery last week to end at $48,227.90, a gain of 7.28% over the previous week’s close. The relief rally is likely to face stiff resistance in the zone between the 50% Fibonacci retracement level of $46,775.41 and the 61.8% Fibonacci retracement level of $51,050.62.
The 20-week exponential moving average (EMA) has turned up and the relative strength index (RSI) is in the positive territory, indicating that the bulls have the upper hand. Therefore, any pullback from the current level is likely to find buying support at the 20-week EMA.
If the price rebounds off this support, the bulls will again attempt to resume the upmove. A breakout and close above $51,050.62 could clear the path for a rally to $60,000.
Contrary to this assumption, if the bears pull the price below the 20-week EMA, the BTC/USD pair could drop to the 50-week simple moving average (SMA).
What is your sentiment on BTC/USD?
The Bitcoin price weekly analysis shows that the recovery has continued without any major hurdle. Can the bulls drive the price above the psychological level of $50,000?
Bitcoin price technical analysis: daily chart
The bears tried to stall the rally in Bitcoin’s price on 11 August and again on 14 August, but they could not sustain the lower levels. This suggests that the bulls are buying on every minor dip.
The rising moving averages and the RSI near the overbought zone suggest the path of least resistance is to the upside. If bulls push the price above $48,227.90, the pair could rally to $51,599.95 where the bears may again mount a stiff resistance.
If the bulls do not give up much ground and defend the 20-day EMA successfully, it will increase the likelihood of the continuation of the uptrend.
The first sign of weakness will be a break and close below the 20-day EMA. Such a move will suggest that supply exceeds demand and that could result in a decline to the 50-day SMA.
How to trade bitcoin this week
Bitcoin’s rally is nearing the stiff overhead resistance zone at $50,000 to $51,599.95. If the pullback from this zone is shallow, it will increase the prospects of the continuation of the rally.
On the other hand, if the bears pull the price below the 20-day EMA, it will suggest the start of a deeper correction to the 50-day SMA.
The views and opinions expressed in the article are those of the author and do not constitute trading advice. Trading and investing involve substantial risks and you should do your own research, or contact your financial adviser, before arriving at a decision.